Borough freezes hiring in wake of Walker vetoes

PALMER — Fire trucks and ambulances will have to last longer in the Mat-Su borough, overtime for borough employees is suspended, and no new personnel will be brought on board.

Steep reductions in borough services, the elimination of capital budgets, and other emergency measures could be next, officials say.

The hiring freeze and overtime ban are immediate short-term impacts of Alaska Gov. Bill Walker’s vetoes on local government, according to discussion at a borough assembly meeting Wednesday night. Walker announced more than $1 billion in vetoes on June 29, giving local governments little time to react before the July 1 start of the 2017 fiscal year. Among the cuts is an approximate $5.7 million from a previously suspended bond-debt reimbursement plan.

An additional $2.2 million was taken out of two education funds, one for the transportation, meaning schools will likely also scramble to make up the shortfall.

Borough officials now face an unanticipated $5.7-million hole in their budget. Borough officials were still evaluating long-term options, Moosey said.

“I think one thing to notice is the Mat-Su seemed to get hit particularly hard,” he said. “Part of that, I believe is certainly because we have more activity, being a growing borough.”

Borough officials started working on the issue from the June 29 announcement, Moosey said.

“It gave us really no time to react, other than internally,” he said.

The timing puts the borough in a tight spot, Moosey said. Tax bills for the 2017 fiscal year have already been mailed, and additional revenue streams could take up to a year to develop. Borough officials also don’t know whether the cuts constitute a one-time loss, or if additional measures are planned, Moosey said.

“Unless we are greatly reducing services, we have a revenue problem, and I’m viewing this as a tax shift,” he said. “The State of Alaska at this point in time is choosing not to find ways to increase your revenue or tax, and they’re shifting their burden onto us, and that’s our response.”

State legislators can override the cuts during the special session slated to start July 11, but borough lobbyist John Harris said he didn’t think that was likely, due in part to the mechanism for the override, which would require both houses to meet in joint session and create a three-quarters vote, Harris said.

“It’s a big hurdle, and in my opinion, a very unlikely one,” he said.

Instead, legislators would likely single out the bond debt reimbursement and other educational issues and pass an appropriations bill directly addressing them, which would require a smaller two-thirds margin to pass, Harris said.

“I don’t know what they’re gonna do,” he said. “I’m not sure they’re gonna do, but I think it’s pretty sure it’s within the first five days of the session they have to make up their minds about veto overrides.”

An additional obstacle to dealing with the situation is that borough statute sets the property tax rate at 10.269 mills. In order for the .7 mill required to make up the gap on top of the borough’s current mill rate of 9.984, the mill rate would need to stand at 10.684, higher than that allowed by borough ordinance.

A mill is a unity of property tax equal to $1 for $1,000 of assessed value.

Because tax bills have already been mailed, the assembly would have to evaluate options for adding the additional tax appropriation onto the tax bills or making other changes to the budget, which could entail a legal review, which borough attorney Nick Spiropoulos said is already underway.

“What I’ve been researching for the past several days is arguments to talk about unexpected events and possibility of going back in and amending the mill rate,” he said.

The assembly would need to be willing in order to make those changes, Spiropoulos said.

“There are legal arguments for unexpected contingencies to go back in and attempt to do if the assembly is willing to go in and do so,” he said. “It’s not something I’d like to talk about publicly, but if the assembly really wants to dig into the nuances of how to do it and how to accomplish it, the only thing I would say is you should do it fast. You should do it very fast; the closer to deadlines you are, the better the arguments.”

However, borough assembly members have set the next meeting on the subject for July 19, which may limit options to re-draft the budget or change what local residents will pay for property taxes, Moosey said. Without the ability to develop new revenue within a year, the borough will rely on cuts, Moosey said.

“We are going to have to find cuts in cost and that’s really our only way,” he said.

A proposed marijuana tax for the Oct. 4 ballot — paired with a legalization measure — might bring in enough money to make things easier, but because marijuana sales have been unregulated or monitored, officials can’t say how much it could help or hurt, Moosey said.

“I can’t even speculate,” he said.

Asking the legislature to carry the cost of the cuts forward triggered sharp criticism from Assemblyman George McKee.

“I think I’m in another world,” he said. “The state still has a $4.1-billion shortfall, and hear we are talking about telling them that they really ought to just carry that forward to next year. Beam me up, Scotty.”

A property tax increase should only be a measure of last resort, McKee said.

“We are talking about not getting money, and so the first thing that the administration brings up is not efficiencies or cutting the budget, layoffs or anything else,” he said. “The first thing that comes up is what we gotta do is find up with .7 of a mill so we can levvy on the property tax owner. The last thing we ought to be looking at is increasing property taxes.”

McKee mischaracterized the debate, said Vern Halter.

“I don’t think anybody has,” he said. “We’re talking about passing the tax burden down from the state to the borough and forcing us into that situation. That’s the issue.”

Halter criticized legislators and the governor for pushing the borough into hard choices.

“I am totally disappointed in Juneau, period,” he said. “They cannot seem to do their business in a good fashion and then pass it on to municipalities and the boroughs, is what they’re doing. Of course, then we get into these arguments about can we raise the money or new revenue services coming from us locally. That’s flat wrong. I think we should get a message down to Juneau: Do your job.”

Contact reporter Brian O’Connor at 352-2270, brian.oconnor@frontiersman.com, or on Twitter @reporterbriano.